Marlon Dumas marlon.dumas ät ut . ee MTAT.03.231 Business Process Management (BPM) (for Masters of ETM) Lecture 3 Process Implementation & Monitoring Marlon Dumas marlon.dumas ät ut . ee

Agenda for Today Time Contents 10.00-11.30 Project Presentations (teams 1-6b) 11.45-13.15 Project presentations (teams 7-12) 13.15-14.15 Lunch break 14.15-15.45 Process Implementation and Monitoring 16.00-17.30 Exam Preparation

Business Process Lifecycle Management Process identification Process modelling (as-is) Process analysis Process improvement (to-be) Process implementation Process monitoring/controlling In the following we will specify the process modelling task. Especially, we will understand the characteristics of a model, the difference between a meta and a reference model, and how the event-driven process chains (EPC) can be used to design process models. 3

Process Implementation

Harmon’s Process-centric Enterprise Architecture

Process Implementation Organisational Change and Enablement User Participation User Training Change Planning and Management IT Implementation Custom Software Application In-house development Outsourced Packaged Enterprise System Workflow Management System (WfMS / BPMS)

IT Implementation – Packaged Enterprise Systems Typically classified into: ERP: Enterprise Resource Planning, including Manufacturing, inventory control, procurement, financials, human resources SCM: Supply Chain Management, including Material acquisition (forecasting, planning), logistics/transportation Supplier relationship management CRM: Customer Relationship Management Marketing, lead management, sales These functions may come together, or acquired separately E.g. Salesforce (mainly CRM), SAP Business Suite, Oracle E-Business Suite, Microsoft Dynamics AX.

What is an ERP System? Multi-module application that helps a company manage key parts of its business in an integrated fashion. Key features include: standardized environment with shared database independent of applications and integrated applications enables information flow across organizational boundaries to support common transactions and business processes intended to be customized for specific companies database configuration bolt-on software

On-Line Analytical Processing (Industry Specific Functions) ERP System Data Warehouse Legacy Systems ERP System On-Line Analytical Processing (OLAP) Bolt-On Applications (Industry Specific Functions) Suppliers Customers Core Functions [On-Line Transaction Processing (OLTP)] Sales & Distribution Business Planning Shop Floor Control Logistics Operational Database Customers, Production, Vendor, Inventory, etc. © Sumit Lodhia

Business Process Execution Engines Big Vendors Oracle SOA Suite IBM Websphere Process Server MS BizTalk MS Windows Workflow Foundation SAP NetWeaver BPM Other closed-source BizAgi Savvion (Progress) Metastorm BPM TIBCO ActiveMatrix BPM Commercial Open-Source Intalio|BPM Activiti BonitaSoft Community Open-Source YAWL Enhydra Shark A lot of choice. In large commercial projects, the engines on the left column are an option, since upfront licensing costs can be absorbed either by a project, or more frequently, by multiple projects (BPM program). It is worth noting that Microsoft offers two options: BizTalk which has a large number of integration features (all sort of adapters and integration tools), and Windows Workflow Foundation, which is more geared towards smaller projects. In smaller projects/companies, the other closed-source engines are an option. These compete with open-source solutions, among which we can clearly distinguish between commercial open-source (companies making revenue out of consultancy, training and branding), and community open-source. In this course we well use YAWL for 3 reasons: Very easy and relatively lightweight installation (both on Windows and Mac), and small footprint – Cf. YAWL4Study Quite advanced resource management features, good for illustrating various ways of assigning tasks to actors Freely available, no restriction

Danske Bank: Customer Package Process Juni 2003 August 2003 October 2003 December 2003 Marts 2007 Introduction of Customer packages. Word template to collect info © Steen Brahe, Danske Bank

Danske Bank: Customer Package Process Juni 2003 August 2003 October 2003 December 2003 Marts 2007 Backoffice group created Handles the creation process © Steen Brahe, 2007

Danske Bank: Customer Package Process Juni 2003 August 2003 October 2003 December 2003 Marts 2007 Case Transfer System Automatic validation and transfering © Steen Brahe, 2007

Danske Bank: Customer Package Process Juni 2003 August 2003 October 2003 December 2003 Marts 2007 Workflow enabled creation process v. 1 Automatic process control, 0% automated activities © Steen Brahe, 2007

Danske Bank: Customer Package Process Juni 2003 August 2003 October 2003 December 2003 Marts 2007 Workflow v. 6 80% automated activities © Steen Brahe, 2007

Danske Bank – System Architecture Executable Business Process A1 A3 A2 A4 WSDL A1 WSDL A2 WSDL A3 WSDL A4 Service Bus / Container App1: COBOL App2: PL1 App3: Java App4: C# © Steen Brahe, 2007

Process Monitoring & Controlling

Process Monitoring and Controlling design Process execution (Re-) implemen- tiation Monitoring & Controlling Analysis Strengths/ weaknesses Process design Imple- mentation Process execution © Michael zur Muehlen

Types of Process Monitoring Runtime Monitoring (Business Activity Monitoring) Viewing the load of the process Identifying problematic cases Identifying late cases (risk of missing deadlines), etc. Post-mortem Monitoring (aka Business Process Analytics) Performance KPIs: cycle times, resource utilization, error rates, … Identification of bottlenecks See for example: BizAgi BAM: http://wiki.bizagi.com/en/index.php?title=Analysis_Reports_BAM Analytics: http://wiki.bizagi.com/en/index.php?title=Analysis_Reports_Analytics For a long time “monitoring” was only known has measuring the performance of hardware (e.g. response time). Organisational monitoring means the analysis of processes from an IT but also and especially from an organisational viewpoint. With an efficient process monitoring it should be possible to answer immediately to a customer request like “What is the current status of my order?” What is my beginning to end cycle-time, system response-time, or system queue-time for each business process? I want to improve my supply chain’s responsiveness to customer demands by reducing my “Order to Cash” cycle time by 10%. What specific business process areas and users do I need to improve and train to achieve this goal? What are the slowest business process areas? How do today’s averages compare to the last months average? Who are my slowest users for the transaction, “Create sales order”? How do their individual averages compare to our departments benchmark? Is my system secure? Which users executed the payroll process today? Based on these trends, Forrester and Gartner Group are both calling for a new kind of technology management at the process level: e-business process monitoring. The justification for this call is that in e-business environments, automatic interpretation and routing of online information about the status of business process execution will become routine, and messages automatically deriving from inside the company will seamlessly integrate with those from business partners. Established online brands are already starting to integrate external services. Take the example of Sony Corp., which recently announced a new credit card, mileage program, and online bank. For the online Sony customer, the lines separating the different business divisions of Sony and its partnering bank are no longer visible. Thus, IT service management for such complex services has to guarantee the continuity of business processes regardless of the business unit or service partner performing the action. Only better communication and information integration can achieve this goal.

Process Monitoring: Dashboards Process Cycle Time of Order Processing Process Frequency of Order Processing Process Cycle Time of Order Processing split up to different Plants IDS (2003)

Beyond Monitoring – Process Mining 1) basic performance metrics 2) process model 3) organizational model 4) social network 5) performance characteristics If …then … 6) auditing/security www.processmining.org

Process Mining Tools ARIS Process Performance Manager Percetive Software Reflect Fujitsu Interstage (BPM Analytics) ProM (open-source)

Process Mining – The ProM Framework www.workflowcourse.com

ProM Demo http://www.processmining.org/ www.workflowcourse.com

Process Controlling Collation and analysis of runtime data Comparison of actual- and target data Active impact on current process execution as well as future process modeling (target) Goal: Improvement of an enterprise‘s adaptability to changes in the environment and in the enterprise itself In addition to process monitoring data are aggregated within the process controlling task. This is the prerequisite for elaborated data analysis and the first step towards a process-oriented executive information system (EIS).

Process Controlling Establish Control Points Objective: Establish a system for controlling the process and providing feedback to the people involved Establish Control Points Control points are activities such as Inspection, verification, auditing, measuring, counting… Usually considered business value adding Without control points and a control system the only way of assessing process performance is customer feedback The process ends up in a reactive mode Poor quality is discovered too late Location of control points is determined by Criticality – impact on customer satisfaction Feasibility – physically and economically possible Laguna & Marklund

Process Controlling (cont.) Develop and Implement Measurements Involves answering the questions What is to be measured and controlled? What is currently measured (available data)? Can a business case be made for a new measurement system? What is an adequate sampling method, sampling size & frequency? Five measurement categories: Measures of… Response time (lead-time, cycle time) Cost (Quality, PAF, internal and external failure costs) Conformance (to given specifications) Service levels (degree of availability, service reliability) Repetition (frequency of recurring events such as rework) Laguna & Marklund

What to Measure? The Balance Scorecard Framework After Kaplan & Norton (1992)

Strategy Map: Capture a Cause Effect Relationship from the Bottom Up More rapid and accessible services Improved Returns on Investments Stakeholder Economic Model Process Reduce Re-Activities thru ABC Establish Web-Based Self Services Internal Process Expand Global Facility Reach Leadership Development Knowledge Management Learning & Growth Facilities and Fixed Assets Human Capital IT Infrastructure (Investments) Financial http://www.exinfm.com/

Examples of Measurements by Perspective Stakeholder / Customer Internal Processes Current customer satisfaction level Improvement in customer satisfaction Customer retention rate Frequency of customer contact by customer service Average time to resolve a customer inquiry Number of customer complaints Number of unscheduled maintenance calls Production time lost because of maintenance problems Percentage of equipment maintained on schedule Average number of monthly unscheduled outages Mean time between failures Learning and Growth Financial / Investments Percentage employee absenteeism Hours of absenteeism Job posting response rate Personnel turnover rate Ratio of acceptances to offers Time to fill vacancy % of facility assets fully funded for upgrading % of IT infrastructure investments approved # of new hire positions authorized for filling % of required contracts awarded and in place Here are some examples of performance measurements by balanced scorecard perspective. http://www.exinfm.com/

Extend the Strategy Map with Measures, Targets and Initiatives Stakeholder Detailed statement of what is critical to successfully achieving the strategy How success in achieving the strategy will be measured and tracked The level of performance or rate of improvement needed Key action programs required to achieve objectives Faster Service Access Self Service Applications Lean Processes Objective Description Measure Target Initiative Internal Process Eliminate waste, reworks, and other errors in our processes Number of Reworks 2 per setup per month each Outlet Office Lean / Six Sigma Process and Value Map Analysis Web Enable Technologies L&G Invest in IT Investments http://www.exinfm.com/

Alignment of Scorecard Components Make sure the components of your scorecard fit together. We want to create a tight model for driving execution of your strategy. Goal Objective Measurement Target Initiative Achieve Agency operational efficiencies with best practices in the private sector Reduce Operational Service Costs by 50% over the next 5 years Cost per Outlet Office, Cost per Region, Cost per FTE 5% - Year 1 10% - Year 2 15% - Year 3 Activity Based Costing / Management Reduce identified re-activities within primary processes by 80% over the next 3 years Waste Volume Charts, Rework Tracking, Cycle Time End to End in S-LX (5 of 7 Regions) Waste stream reductions of 5% each year, Reworks cut in half for next 3 years, cycle time cut by 75% Lean / Six Sigma Here is a basic example of how everything should connect and link up from goal to objective, objective to measurement, measurement to target, and finally, close the loop with an initiative to drive strategic execution upstream. We want a good solid, tight model where everything is aligned together. http://www.exinfm.com/

Exercise CVS Case Study Which performance measures is your to-be process intended to improve? How would you monitor these performance measures? How would you ensure that pharmacies are indeed applying the principles of the to-be process?

Reference Models Performance Measures in SCM Overall Inventory Turns Annual cost of goods sold (company info)  average total inventory Raw Materials Inventory Turns (manufacturing companies only) Annual cost of raw materials purchased (3)  average raw material inventory Work-in-Process Inventory Turns (manufacturing companies only) (Annual cost of raw materials purchased (3) + Annual cost of conversion (4))  average work in process inventory Finished Goods Inventory Turns Annual cost of goods sold (company info)  average finished goods inventory Percentage of safety stock Average safety stock  total inventory Purchase order cycle time (in days for purchasing department and excludes supplier lead time) Average amount of time (in days) elapsed from point of intention to place order to receipt of order by vendor Supplier lead time Average amount of time (in days) elapsed from point of order to delivery Supplier on-time delivery Percentage of orders supplier delivers on scheduled due date Find more at: http://www.exinfm.com/workshop.html

Benchmarking: SCORcards T. Gulledge & T. Chavusholu: “Automating the construction of supply chain key performance indicators”, Industrial Management & Data Systems, 2008.

Recap: The Layers of BPM Activities BPM Setup Strategic Alignment BPM Governance BPM Methodology Process-aware Infom. Systems Culture & People Lean/ Six Sigma Process Analysis Process Identification Process Modelling Process Measurement Process Improvement Process Implementation Process Configuration Process Development Process Training Process Testing Change Management Process Execution and Controlling Process Execution Process Monitoring Process Mining Process Perform. Mgt. Process Controlling

BPM’2012 in Tallinn 3-6 September 2012 200+ delegates from 40+ countries 12 specialized workshops (3 September) 3 keynotes, 25+ talks, 10+ demos (4-6 Sept.) BPM Practitioners Day (6 September): Case studies & experience reports Tutorials (Social BPM, Predictive Analytics for BPM) http://bpm2012.ut.ee

Readings P. Harmon. Business Process Architecture and the Process-Centric Company, BPTrends Newsletter, March 2003. http://tinyurl.com/c88rlp P. Harmon. Business Processes at a New Company: What Do You Do First?. BPTrends Newsletter, October 2004. http://tinyurl.com/cfckrf